Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices for consumers at retail outlets, bars, pubs, and restaurants in the forthcoming year as part of the current Budget announcement. Alcohol tax in the UK is a duty paid by producers and importers, determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves disclosed that alcohol duty will escalate in line with inflation, aligning with the 4.5% Retail Price Index increase observed this year. The adjustment to alcohol duty will coincide with the RPI on February 1, 2026, to sustain its present real value.
In response to various perspectives, Rachel Reeves emphasized that the decision to raise alcohol duty considers the vital role of alcohol producers and the hospitality industry in the UK’s cultural and economic landscape, along with the duty’s function in curbing alcohol-related harm.
Amid calls from industry leaders to freeze duty, the Government opted to proceed with the duty increment, citing the ongoing financial strain on businesses due to previous tax hikes and the introduction of the new glass tax. Official data shows that alcohol prices have already climbed by 5.8% compared to the previous year.
Last year, drinkers faced a 3.6% rise in alcohol duty, resulting in a 54p increase for a bottle of wine and a 32p rise for gin, while draught duty saw a 1.7% reduction, equivalent to a penny off a pint, in the 2024 Budget. Miles Beale, CEO of the Wine and Spirit Trade Association (WSTA), expressed concerns about the cumulative impact of tax hikes on the industry.
Despite opposition from industry representatives, the Treasury proceeded with the decision to raise alcohol duty, prompting criticism for potentially exacerbating economic challenges faced by British businesses and consumers. The UK Spirits Alliance highlighted the detrimental effects on distillers, pubs, and the broader hospitality sector.
On the other hand, the Alcohol Health Alliance (AHA) welcomed the Chancellor’s move to adjust alcohol duty in line with inflation, emphasizing the importance of maintaining alcohol duty to address public health concerns and reduce alcohol-related harm.
Alcohol duty plays a significant role in the UK economy, projected to generate approximately £13 billion in the fiscal year 2025-26. Comparisons with EU excise rates reveal the UK’s position as the third highest taxer overall, particularly in beer and wine categories.
In conclusion, alcohol duty rates in the UK are set per litre of pure alcohol and vary based on the type and strength of the beverage. The adjustments in duty rates to align with inflation will result in higher prices for alcohol at retail establishments and drinking venues.
